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Episode #139 ... Friedrich Von Hayek - The Road to Serfdom

2020-02-11 | 🔗

Today we begin our discussion of the work of Friedrich Hayek. 

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Hello. Everyone I'm Stephen West. This is philosophize. This big, warm heartfelt. Thank you this week. The people that support the show unpatriotic you make my life possible. You make the show possible. Thank you very much for all that you do today, episodes on the philosopher, Frederick VON Hike, in his influence to work the road to serve them. I hope he loved the show today. So all the way back in the late nineteenth century, shortly after the worker marks, shortly after the economic changes associated with the industrial revolution. There were several groups, a thinkers that began to create what would eventually be in all our movement towards centralisation, the central planning of economies. Let me explain what central planning is by explaining why the thinkers felt compelled to start a movement in the first place. So in the late nineteenth century, the west- world was primarily made up by market economies. People like marks
Several others come along and start throwing around critiques of capitalist market economies. They create enormous inequality, They lead to the alienation of the worker. They fragment economic efforts and create waste, because people can be engaged in so many different incompatible task at once. But not the least of these criticisms was the claim that these market economies, based on it, law design in ably lead to massive ebbs and flows within the market, booms and crashes crashes and end up negatively impact on the lives of potential billions. The late nineteenth century was rife with thinkers looking for replacements, for marketing enemies and waiting for their inevitable demise. What time went by and allow came August of nineteen, twenty nine, the beginning of the great depression, global economic collapse, and it seemed many these thinkers at this was the day of reckoning for capitalist market based systems. This was marxist prophecy, finally coming true when trying to figure out what This global knelt down there were many theories, but one of
Our common ones was at the technological advances of the industrial revolution. Pretty so many more goods at such a more efficient rate that market economies couldn't handle it and became flood. There was a real feeling at the time that our market economies of the past, where an outdated We have doing things that just can't keep up with. This of economies that are going to have to exist in a post industrial revolution world the solution for so many of these countries affected by the great depression, was to have the guts. Step in and try to prop up the economy in various ways until it was functional again. This is where central planning comes into the picture, the idea is that we would remove markets from the equation altogether and instead rely on a central body like the government to come up with a plan for how What want the economy to look and then they control aspects of the economy and do their best to ensure that plan is executed markets or
getting the job we wanted done. So let's call upon the government to make sure it gets done. This was the logic behind central planning or centrally planned economies to world war. Two comes along during the great depression and on display our multiple world powers that have moved towards central planning by the way, certainly not the only kind but the most popular version of central planning at this time with socialism, but during world war. Two, there were all types of centralisation on display. You had soviet Russia, you had now national socialism in Germany you had more marginal versions of socialization in the United States through after our new deal or in the UK, stemming from the fire be society habit was going, on an ITALY once again, Major world powers were turning towards central planning and Actually, during the war effort, you saw the governments of these countries controlled giants. Sections of the economy in an effort to make sure things kept going, not to mention even prior to
the extreme cases of the war. You had labour cartels emerging in socialist countries where they would set up arrangements between governments, businesses and labour unions, and they use price fixing. They determine how many products would be made, determine how many people could work, who could work and more, During the war, central planning had staked a claim to the world, which brings us to one of the most significant economic events of the twentieth century. The end of
war too, because now that nations work facing an existential threat where they needed the government to step in and ensure economic order, what do they do? Do they returned back to the market economies that were so popular before all this chaos broke out? Do they take this as a sign and stick with central planning? Many nations did stick with central planning, so it was right at this snapshot in time right after world war. Two that the philosopher we're gonna talk about today wrote one of the most influential books of twentieth century economics. He is Nobel Prize Winning economist, Frederick Vanhecke, and, to put it very simply, I thought that all these societies, that were using the government to control aspects of their economy were making a huge mistake and that economists and philosophers of his time didn't even realise just how much market systems were accomplishing for the world until they weren't there anymore hike was a fan of the austrian School of economics which, if you're
but from our episode, set their sights on refuting many of the ideas that were core to socialism. So it's impossible to divorce a critique of socialism from his work entirely, but it would be equally impossible to understand the scope of hikes work without also considering that he was ultimately critical of the primary idea behind socialism, which is the central planning of economies, should also be said in a clarification later on this life, he said that he define socialism as any system or the gun exercise a significant control over the economy. High could probably want to start out by talking about this movement towards centralisation that began in the late nineteenth century. These people were no doubt trying to solve problems, they saw with market economies, but it's really take it. What their solution was We have a way that we want the economy to be so. Let's make a plan and then use this really powerful tool. We have called the government to execute that plan was essentially to say: let's have a meeting get all the smartest people we
fine, put him in a room and plan. What aren't higher economy is gonna. Look like now on one and that sounds like one of the most arrogant things you ve ever heard, but then again we do have This long tradition, within philosophy of optimism, towards this idea. Of being able to come together, have rational discussions about things and come up with the best solution. Why shouldn't we be able to come up with a plan or designed for the entire economy? I once said quote The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design and quote hike is no as an anti rationalist in this regard, negative philosophically loaded term, but the best way to describe it in this context is to say that high believes that a total understanding of how the economy should be structured is unknowable. And even if it were knowable, it certainly wouldn't something we could arrive at by assembling a handful
thought leaders in a room. Just talking about stuff the economy to hike is the sum total of billions of in its actions, each one of them giving us crucial information. The best comparison to understand how high exceeds the functions of the economy is to think about how similar it is to language. You can't sit in a room come but the bunch a new words chisel them into stone and save here's a new language, everybody. No, that's not how language or words work, because we talked about on our vit episodes language, is a living breathing organism. The derive their meaning from the. They are used by people within a particular linguistic community. So in this way, language is a collective agreement between people that is constantly moving constantly about based on the sum total of the choices of sometimes millions of people. The economy to hike is a similar sort of collective agreement between people, the Cappy plan predicted or ever fully known the
government should never be in the business of coercing the economy, because the government can never have an exhaustive understanding of the billions of transactions that are going on to hike the only people you could say kind of have a sort of fragmented version of total knowledge of the economy is the aggregate of people that make up the economy and their local knowledge of their respective fields. Linux way take Grandma B interests owns a flower shop in the suburbs of Seattle, Washington, no matter How smart people are that you could ever gather into a room, there is no way the government or any centralized body for that matter can ever know as much as grow. MOM Beatrice knows about her customers, but flower We're gonna buy what prices there willing to pay for things, what durations they like on their flowers, how many flowers are going to find a particular circumstance. The list goes on forever. Grandma Beatrice has with high would call. Localised knowledge of criminal section of the economy
by the way. In the same way, she has local knowledge. The way words are used around her in Seattle, Washington markets allow forces I used to have a decent realized approach to the way the economy evolves, based on the choices consumers and suppliers rather than on some plan. A few people thought sounded good at the time. One of the big problems with having a centralized group that makes all the plans for the direction of society. Is it whenever new problems come up. It always requires you to give more or to the state to be able to solve those problems seat. When you remove markets from the equation instead say we're gonna plan everything you miss, out on so much localised knowledge that actually makes standing the economy even possible. Take an example used in the work of Eric MAC. Let's say you have a centrally planned economy. What is this any central planner from deciding one day that we should take Oliver titanium resources and dedicate them to the production of licence plates. What,
he's getting at here. Is that when you remove markets, when you remove the localised knowledge of people like Grandma, Beatrice and everything she knows about the supply and demand of her business, the price something within a market system really so much information to people about how much supply there is for something versus how much demand there is for something. How is a central point? to ever know what the true values of anything but were dismissed. I trust You know everything in old. Keep things ordered like their God or something sounds a lot like got the idea, if we don't have a designated group of people planning the economy, that the alternative is that society is going to collapse into complete disorder. No, Order within an economy emerges spontaneously for hike, justice, Words derive a new meaning spontaneously. Don't need a centralized body planning language and we don't need one for the economy either. Both are self ordering systems more that? The knowledge we need, if we want anything to work, be language,
the economy or any other example? There are many kinds of be self ordering systems all around US look for them. The knowledge we need for those two work is fragmented across all individuals, and this is probably were high. Could one introduce how important the concept of freedom is to him sometimes he also uses the word liberty, but its point, that we need everyone to be able to act freely if we can ever hope to have all the information there choices provide each person Individual varying choices embody yet another crucial perspective of localize knowledge, for example, apply the concept of central planning to do idea of social order? This is the equivalent of Looking at everyone's individual skill sets, and then, according them as resources that a ball of people have chosen will best benefit the plan of society is that you have any examples of centrally planned societies in the twentieth century. Not only should we not want to live like we're, an ant colony, hike would say self ordering systems like the economy have lesser potential when you limit a person's liberty and as such, one of our primer
goals we should have is to maximize people's liberty to choose once again govern, and should not be deciding the ins for people. It should be protecting our liberty so that we choose. The ins for herself. Society should not be thought of as an organization. Society should be based on self ordering system that set high isn't against all organizations. He doesn't think there's zero room for planning. Just not the government level, he's all four people starting businesses or synagogues charities are sports or whatever you want. These things have specific planned of joy, gives they're trying to bring about the differences. The people, involved in those organizations volunteered to be a part of them. You can't run a country like its eliminate stand. The role of government to hack is to enforce the rule of law. This is an absolutely crucial thing to have ever we're. Gonna have a market economy, but then it's also due to other things, one. It should execute the projects. The public needs that voluntary transactions don't provide and too
give assistance to quote some unfortunate minorities, the weak or those unable to provide for themselves and quote Hayek. Wrongly opposes the idea of equality of outcome, because it is utterly incompatible with a society of free people see for going to treat people fairly across the board when it comes to the legal system. Can never aspire to any sort of real equality of outcome to hire me. If for no other reason, people are different, people make different choices, they care about different things. People want different things out of their life and that's ultimately, a good thing for us, because giving people the freedom to choose gives society access to their unique set of localize now either have to sacrifice equality about come where equality under the law you can't ever have both to hijack. So take your pick but Hayek I live in a socialist society and things are great here. Say socialism, so bad shouldn't the whole society of burned to the ground. By this point, socialism can work
for a long, long periods of time, but only through the use of government coercion, sometimes extreme government coercion. You can be very happy living in a socialist, sorry, but only as long as what you want to do with your freedom corresponds with. With certain pre planned aspects of your life that the government has already chosen? as long as you never want to stray from the pact too far, you're gonna, golden in a socialist countries, see under a market based economy, people can agree and disagree and dedicate resources, two things that are completely incompatible with each other, but under central Signing the resources have to be used in a way that is planned by the government. The choicest people make about the preferences of their lives so often need to be approved by the government and oftentimes. What both of these things require is the use of propaganda by the government to hike, sometimes incredibly subtle,
propaganda to keep people subjectivity and desires aligned with the goals of the central plan? The use of central planning within economic systems puts the citizens of that country on what high it calls the road to serfdom, which is also the title the book he wrote in that country, immediately after world war, two what's meant when he says the road to serfdom, is quite simply that movement towards central planning or a socialist society. The first step for citizens on the road towards totalitarianism. He gives a ton of different reasons for this throughout the road to serve them. Some of them are obvious, just guess what we already talked about so far. But let's talk about a couple other, once one has to do with the nature of power structures within these socialist societies, central planning requires that we give an extraordinary amount of power to a small handful of people, that'll be making decisions for planning society. How this is pan out historically, is sometimes is responsible. Even that falling into the hands of a single person be at some sort of dictator, or even just a SEC.
The person that dominates that group that's making the decisions We're not only as a danger silly narrow point of view to run a society from that in itself may run the risk. Of totalitarianism, consent. Additionally, what high access in a famous chapter from the road to serfdom, titled, why the worst get on top hike asked the question what sort of person would be? RON towards one of those positions of power and a society with a centrally planned economy. What sort of person when you tell them at the job interview, you're gonna be one of the very few that decide the plan for society. What kind of person not only nods enthusiastically and is excited about that prospect There is also willing to run an elaborate campaign just for the luxury to have that position of power. Your campaigning to be in the business of government coercion hike thinks all the people that you'd ever really want to be in a position like
the tolerant, the measured the Weis, the empathetic etc would never want a job like central planner, where there such a disparity of power and that's probably healthy- the type of people that are attracted to physicians, like this scene, We are always the ones that stand to gain the most from the position, which also makes, in the person motivated to campaign the hardest most willing to exploit the office once they get it most likely to use any means necessary to maintain that position which for high it means that their often the politicians willing to take advantage of the uneducated the gullible and will even use hatred towards other groups as a way of generating support, hike, describes as person in the road to serfdom. Here quote, he will be able to obtain the support of all the docile and gold. We have no strong convictions of their own, but are prepared to set a ready made system of values if it is only drummed into their ears sufficiently loudly and frequently end quote, because these are effective tactics for getting elected, you're, always
in the end up with the people willing to use those tactics in office, this person will always be able to beat the tolerant, measured and wise person to hijack the person. That's willing to act differently in the public sphere, than they do in the private sphere, but always have an advantage, and thus that is why the worst get on top, but also consider, even if you were a decently well meaning person in office for a period of time that window You give someone a position of power in the world whether it's the dictator of a country or the assistant manager, dairy queen whenever there's power involved, there's a sort of self reinforcing nature bout it people tend to think. If I'm not using this power, that's when given to me, can I say that I'm doing my job, not to mention the need to justify your position of power to the people who gave it so often resulting in making pointless choices mistaking movement for progress. This is just One reason of many. Why otherwise
perfectly well, meaning people whose intentions were just to come up with a plan for how we want society to look and then get busy on executing it. This is one way to tell a terrorism can take hold, but this is Just one road to serve them, there are many others as it happens gradually over the course of hundreds of years. The famous economist Milton Friedman, who is a friend and colleague of high x and knew his work very well, was ass, wants to do an interview in part talking about high ex book. The serfdom in what he was trying to convey with it. During the interview, he gives an anecdote describing the effects of this type of grass who will centralisation in the United States throughout the course of his life? This is taken from the interview quote. I'm a very old man And I was graduated from high school in nineteen. Twenty, eight! That's a long time ago. Now, if you look at the situation in nineteen twenty eight, we were much poorer in terms of food Nickel, goods, we didn't microwaves, we didn't have washing machines and go down the line. There's no quest
in that were enormously wealthier today, in that sense, and and mostly have a higher standard of living. From that point of view, on the other hand, we were safer, more secure, free one thousand nine hundred and twenty eight. Then we are now that's at that time. Government was spending something like ten to fifteen percent of the national income, the private sector, eight thousand five hundred and ninety. Today, government controls over half the national income and private enterprise controls only the rest. Where have all these good things come from? Can you name any of those additions to our well being that have come from government? It wasn't the government. The prick
the microwave, wasn't a government that produced improved automobiles. It wasn't the government, the produced computers that led to the information age, not on the other hand, consider our problems are major problems are not economic are major problems are social, are major problems are the underclass in the center cities. The development of crimes that today were much less safe than we were when I graduated high school, we have much less feeling of security, much less optimism about what the futures gonna be like, and all the problems have been produced by government consider the schools, the quality of schooling I got in a public school in nineteen, twenty eight was almost surely a great deal higher than you can get in any, but a small number of schools. Now you have the dropouts, you have the decline and scores of the essay tee and the like. Why? Because education is the most socialized industry in the United States. Ninety percent of our kids are public schools. Ten percent in private and education is a completely central
eyes to system, and it behaves just the way every other socialist system? Does it produces a quality output benefits. A small number of people, currently mostly those were associate with the National Education Association and harms, does a great deal of harm to other people. End quote, you know a few episodes ago. I gave the example of it may be being possible that, instead of treating other members of society is, though, were in competition with them. Maybe we could start thing, In about the more like members of one giant family, I, it is a great deal it was someone who would have heard me say that and smack me right in the mouth, As one of the bigger ideas that high offers up in his work is the idea that society is not a family, nor can ever be like a family or it would completely collapse high says that life in this modern world forces us to live. Two very different
and parallel lives on one hand, we are members of a family, a group of friends, and when we're in that setting, we think of those people and treat them in a very specific way. Example from the episode is that everybody goes over: the Grandma Beatrice House for the holidays and because she's getting old, all the kids cooked the holiday meal for her. But I would ask just imagine if we really did extend that way of treating Grandma Beatrice to the rest of society, because the other life were constantly living in parallel is our life as an economic agent, a person trying to provide value to people in exchange for a living? Let's see our chef do cook Thanksgiving Dinner free of charge for every Grandma Beatrice it decides to walk the your doors, of course, not be be out of business, instant. But it's not just you we all would be out of business. Society would be out of business the same way. It may sound ridiculous for someone to go to their grandma's house and not give any food she didn't pay for it. Hype would say it's equally ridiculous for people engaged in
markets to treat customers like members of their family living in the modern world requires you to play both rules and things would not be good if either of these spheres tried to act like the other. The work of Frederick Vanhecke to become some of the most influential work, Workin economics and all the twentieth century, but even if you're not convinced, even if you're totally I'm convinced by the economic arguments? Forget the rule of law? Couldn't care less about markets Hayek after listening to his case at the very I want you to remember one thing: it's something he saw as one of the sharpest differences between what we call a free society and a centrally planned society. He says it in a famous quote, while the last resort of a competitive economy is the bailiff, the ultimate sanction of a planned economy is the hangman. Thank you for listening I'll talk to you. Next time
Transcript generated on 2020-02-16.